Jet-Etihad deal; why Naresh Goyal and Rahul Bhatia must work together

Indian aviation’s biggest rivalry, in many ways, is between Jet Airways’ Naresh Goyal and IndiGo’s Rahul Bhatia. But they shouldn’t just compete. They should cooperate — when they talk to the government.

Indian aviation's biggest rivalry, in many ways, is between Jet Airways' Naresh Goyal and IndiGo's Rahul Bhatia. But they shouldn't just compete. They should cooperate — when they talk to the government.

Goyal, effusive and earthy, and Bhatia, reticent but suave and articulate, are different kind of men who had similar beginnings. Goyal began his career in aviation as a humble cashier in his maternal uncle Seth Charan Das Ram Lal's travel agency, East West Agencies, in 1967. Bhatia started in 1989 by joining his father Kapil Bhatia to manage his travel services firm, InterGlobe and Swan Travels.

Both started making it big in aviation by servicing the sales needs of foreign airlines. So, Goyal and Bhatia started their airlines with a crucial advantage others lacked: a well-knit distribution network. They have an understanding of this business and how it operates in India that's deeper than most other players'. Now, the two men between them serve more than half the domestic aviation market. Naturally, they also enjoy immense clout in the corridors of power. Which is why if Goyal and Bhatia play it right and smart, they can save Indian aviation.

Does Indian aviation need saving? Yes. Political and bureaucratic shorttermism and worse can virtually destroy the sector. India's two biggest aviation barons, even if they are rivals, must think smart and long term. And they can look to another sector for clues: telecom.

Telecom was bleeding in the 1990s. It was fragmented and highly competitive. But arch rivals in the telecom industry buried their differences and worked together under the aegis of the Cellular Operators Association of India to lobby for business-friendly policies and tariffs. That brought rates down sharply and the number of mobile phone users exploded. Eventually, telecom companies became profitable. Heartened by the results of partnership, telecom rivals even started sharing telecom infrastructure, all the while keeping their competitive fervour in the market intact.

If Bharti, Vodafone and Idea could do business together, what stops Bhatia and Goyal to join hands to lobby for friendlier tariffs, laws and even share some common resources?

And, here, a remark by Ajit Singh, Union minister of civil aviation, that the opposition to the Jet-Etihad deal is fuelled by corporate rivalry, is a case in point.

While Singh's grouse may be taken with a pinch of salt, it is indeed true that the deal has split the aviation community. Many see the government signing the bilateral agreement with Abu Dhabi as an enabler for the deal. The deal gave Abu Dhabi 36,670 seats that will be progressively made available to Etihad Airways. The air services agreement came a day before Etihad agreed to buy stake in Jet Airways. It raised eyebrows.

Etihad's strategy is quite simple. Like Emirates does in Dubai and Qatar Airways in Doha, Etihad will be flying people to its hub in Abu Dhabi for onward travel to North America, Europe and Africa. The Middle Eastern carriers believe that operating in the middle of the world is an advantage. Goyal, a trenchant critic of foreign airlines picking up stakes in Indian carriers, surprised everyone by being the first mover with the Etihad deal, as soon as the Indian government decided to allow foreign airlines to invest up to 49% equity in Indian carriers.

While it is a no-brainer that India needs bulge-bracket FDI, it is to no one's credit that the government is seen backpedalling now by reading its archaic civil aviation rule book to Etihad. It might result in another instance of a foreign investor quitting, this time even before consummating, after losing its way in India's regulatory maze.

Aleading corporate lawyer connected to the deal said at a recent interaction on FDI that the government should simplify, simplify, simplify... The same was the case for telecom. But telecom barons worked together in the 1990s and persuaded India's politicians and bureaucrats to simplify rules. That telecom rivalry is seen now to be stalling some aspects of policy again should be an even bigger eye-opener for Goyal and Bhatia.

Aviation can't afford deals going sour or policymakers throwing bad rules at companies. If Naresh Goyal and Rahul Bhatia lobby the government as one pressure group, they will help themselves, aviation and India.